CHALLENGE: A combination of manual procedures and incompatible computerized accounting systems at several dozen regional Medicare contractors led to nonstandard billing, payments and reporting.

SOLUTION: Planned since the late 1990s, starting in 2005 and through this year, HIGLAS, an Oracle 11i-based accounting system, is online with 10 contractors. More contractors will get the system by the end of 2011.

FULL SERVICE: The HIGLAS team handled technology and helped accountants get over their palpable resistance to giving up their old system.

Few federal agencies face the financial management challenges that are the daily norm for the Centers for Medicare and Medicaid Services. As one of the world's largest health care purchasers, CMS administers care for one in four Americans, or 92 million people, accounting for 34 cents of every dollar spent on health care, and 13 percent of the federal budget. To put CMS' responsibilities another way, $635 billion of taxpayers' money, including a billion fee-for-service claims, flows through its administrative systems.

[IMGCAP(1)]Despite such responsibilities ' or the looming hammer of the Federal Financial Management Improvement Act (FFMIA) and guidance from the Office of Management and Budget that requires agencies to have integrated accounting systems that produce reliable data ' CMS didn't have a well-oiled financial information machine.

'For 30 years, we used glue-and-bubblegum systems,' said Tim Hill, chief financial officer of CMS, part of the Health and Human Services Department. 'We had no accounting system for the Medicaid fee-for-service system. It showed up very clearly in our yearly financial audits that we weren't going to get FFMIA approval. We absolutely had a material weakness in our financial statements.'

In the late 1990s, officials, including Hill's predecessor as CFO, began planning to modernize the financial systems, setting their goals as risk management, heavy use of commercial solutions and maximum efficiency. The result is the Healthcare Integrated General Ledger Accounting System (HIGLAS). It is an integrated, dual-entry system that runs on Oracle Federal Financials, an applications suite built around the Oracle 11i database.

'The old system was so fragmented there was no way of centrally managing the financial records of the agencies because it was being processed by roughly 48 contractors,' said Tim Carrico, program manager at the Logistics Management Institute, a company that helps CMS oversee systems integrator IBM, which bought the unit of PricewaterhouseCoopers that had started the project.

[IMGCAP(2)]Patient intake

Janet Vogel, director of CMS' financial management systems group and former director of the HIGLAS program office, said 10 contractors ' regional insurance carriers ' are online transferring data via private networks to CMS headquarters in Baltimore. Having started the first contractor in May 2005, the agency has a yearly schedule for bringing all of them onboard by the end of 2011. Five more are planned for 2008, and seven the following year, 'so that all Medicare and Medicaid payments are processed through HIGLAS,' Hill said.

'We have a transition process that begins with meeting with the contractors and evaluating their existing systems,' Vogel said, adding that a later phase will include an extensive methodology and process for converting data and transforming business processes. 'We have a standard data format that they need to meet to convert to HIGLAS,' she said. Ultimately, the contractor's data will be switched from their older systems to HIGLAS during one weekend to minimize delays in processing claims.

One of the primary challenges was making sure the system could handle volume that spikes sharply during calendar-driven reporting deadlines. 'We were concerned that processing 4.5 million transactions a night might be too much for the hardware and software,' Vogel said. So the team ran a peak-load simulation that proved successful. Another hurdle was persuading users to stagger their report-processing requests instead of continuing their previous end-of-month scramble, she said.

Fear factor

Hill recalled the resistance he felt at an early meeting with the inaugural contractor's accountants, who had grown comfortable with their home-grown, green-screen system. 'The uneasiness that you saw in their eyes and the fear of having to learn a new system was just palpable,' he said. 'We did a lot of work with those folks. The team worked closely with early adopters to provide hand-holding on how to transform their business processes, then paid some to train others,' Hill said. 'Since that contractor implemented, we've had sites call us up and ask to be accelerated in transitioning to the system. They want to be able to use the system to do their work better.'

Vogel said the CMS team has received compliments. 'We feel pretty good about that. You rarely get that.'

Hill said resistance from OMB and Congress also was formidable in the early funding stages because of an aborted, mid-1990s implementation of HIGLAS' predecessor, the Medicare Transaction System. He credits the current success to having a team of experienced, dedicated financial and project management professionals who could explain to some OMB officials, for example, why Microsoft Excel spreadsheets wouldn't be up to the task.

A key component of HIGLAS is a new Oracle 11i database module, named the Healthcare Transaction Base (HTB). It was rolled out to an early contractor after Oracle customized the product ' which Hill said was originally designed for life sciences and clinical use ' to meet the claims-oriented operational needs of CMS. 'We need a history. We need an audit trail for each and every transaction,' Hill said.

Every contractor will eventually get the HTB. 'What the HTB does is allow us to look, at a document level, at what was the life of that transaction,' Vogel said.Users can access, on a monthly and ad-hoc basis, all financial and nonfinancial documents related to transactions in the HIGLAS accounts payable, receivable, loan, cash-management and general-ledger modules. 'The HTB allows us to see, at a very fine level, what happened to that claim as it was processed,' Vogel said.Hill added that 'in the past, that was just not possible. You just processed each claim, and off it went.'

Precise payments

Arguably the biggest business-process improvement that HIGLAS enables is a streamlined netting process that lets CMS avoid wasteful payments to contractors that owe CMS money, often because their corporate parent's account was tracked separately under the old system. Now, before a payment goes out, it is reduced by the amount owed to CMS. By skipping unnecessary steps, CMS saves both collection costs and forgone interest. He calculates that HIGLAS has accelerated $5.72 billion in netted receivables and payables through May, saving $36.3 million in interest. 'Now, we can operate on more of an actuals basis,' Vogel said.HIGLAS also cuts in half the time to produce CMS' legally mandated quarterly and annual reports from months or even years to a few days or weeks, she said. Mistakes caused by human error are also down, along with the added labor costs needed to correct them.

'Probably the coolest thing is actually getting a [commercial] financial product to work with a relatively limited number of modifications, because it's so uncommon,' Carrico said. Vogel echoed that observation. 'This is one of the projects I've worked on that is most true to' the commercial package, even five years later, she said. 'It keeps it simple, and it's easier to maintain.'